Higher interest rates, additional pension and healthcare spending coupled with rising defence expenditure and more investment in environmental projects are set to worsen EU Member States’ fiscal balances by an estimated 4.5% of GDP on average by the end of the decade. Among large euro area economies, the rise in unavoidable fiscal pressures – interest and ageing-related expenditure – is expected to be steepest in Italy (4.7% of GDP, rated by Scope Ratings BBB+/Stable Outlook), followed by France (3%, AA/Negative), Germany (2.5%, AAA/Stable) and Spain (1.9%, A-/Stable).
The impact of higher interest rates will materialise at different speeds for individual countries, depending on each government’s debt…
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